* Persistent underemployment, gig employment, part time employment, low wage employment, etc., for a growing number of workers.* Increasing number of bubble/crashes, spaced more frequently.* Post-crash, a panicky monetary stimulus to forestall deflationary spiral.* Persistent disinflation despite the above. CB's consistently undershoot inflation targets.* Labor's share of productivity growth declining to record lows. Declining real wages for those under the median income. Stagnant wages for those near the median. Real wage growth for the upper middle class, and astounding gains for the rich.* Persistent long-term manufacturing overcapacity, despite shutting down thousands of factories over the decades.* QE inflates asset prices, benefiting the wealthy. QE, in all other respects, is deflationary.

At first glance, these may appear to be random or unrelated phenomena. They are not. They, in fact, are part of a cohesive whole.

We have worked ourselves, partly by design and partly by historical circumstances, into a demand-constrained trap - a trap that is devilishly difficult to escape from. The OP's question of consumption becomes the limiting factor for the economy as a whole.

It goes something like this: As wages decline, workers have less money for consumption. Given fewer numbers of buyers with less disposable income, there is less demand for goods and services. Those that do have money set aside a large portion of their wealth, so that less of it enters the economy. Thus the size of the overall economies slows its growth or shrinks. Companies adapt by downsizing, outsourcing, and investing in automation; this, in turn intensifies the decline in labor share. In effect, a positive feedback loop intensifying all these existing problems. Some companies adapt by niche marketing to upper incomes. A good example is Harley-Davidson; this firm nearly died marketing utility bikes to the average consumer. They only survived by transforming into a high-end niche manufacturer.

There are two ways out of this trap. The first is a deflationary spiral leading to depression. This could occur through a simple CB mismanagement of the post crash environment. It could also occur as successive bubbles lead to hyper-financialization of the economy (Minsky). In this scenario, ponzi objects begin to overwhelm the real economy, leading to more financial instability - another positive feedback loop. The tendency is acceleration of the bubble/crash cycle leading to a non-recoverable crash (depression).

The depression scenario is not ideal. Once deflationary psychology sets in it will last a generation (as we learned from the Great Depression). Businesses become hyper conservative. They don't want to hire or expand or take risks. Consumers either have no money, or become deathly afraid of spending. Cash hoarding becomes common. Deflationary psychology is another positive feedback loop, contributing to the length and depth of the depression.

There is another option. Government can create money ex nihilo by purchasing goods in the private sector or spending 'helicopter money' via expansion of direct payments. Some combination of basic income and job guarantee would get spendable money to those who spend it the fastest (that is, the demand-constrained workers). The only limit to this process is inflation, which wouldn't occur until companies are 1) competing for labor, and 2) excess capacity is wrung out. After 30 years of neoliberal austerity, this can't be achieved overnight. The biggest problem with this option is cognitive: getting people to understand that deficits are not a bogeyman and government spending is necessary.

The most likely outcome, I believe, is that governments will muck it up and stick with monetary stimulus. After this fails, they will reluctantly try fiscal stimulus. Unfortunately, political pressures will cause it to be too little, too late. If this is the case, I expect a long and deep depression, and an acceleration of radical politics on the left and the right.

Should newly incurred debt be treated as contra-consumption? For example, if monetary policy is eased and as a result unproductive debt-fueled consumption increases for poorer households, it seems like this shouldn't really be treated as a meaningful improvement. It's not clear to me that this scenario could easily be identified though.

mikema63 wrote:Simply that consumption inequality is something that also deserves being considered.

But its meaning is not what the author claims. Consumption inequality in a society where many are not able to consume enough to live healthy and productive lives is very different from consumption inequality in a society where everyone is assured enough to live on, but for many, it is only obtained by either foregoing productive effort and embracing permanent reliance on poverty relief, or undertaking increasing loads of debt.

You made a transparently ridiculous extreme argument to suggest otherwise.

I disagree that it was ridiculous.

Inequalities in consumption obviously happen in our society, and are extremely important. Food consumption inequality for instance, leading to food insecurity, is a serious issue.

More important is the fact that the wealthy's surplus of income over consumption is devoted to securing ever greater economic privilege, power and control, while the poor's deficit of income under consumption is financed by undertaking increasing debt loads, and thus powerlessness and economic servitude.

I could make up an equally pointless extreme story about any particular way you would measure inequality and it would be equally accurate and fair.

No, you could not.

There is no reason not to use consumption inequality in our analytic tool belt along with stuff like income inequality or some very difficult to accurately measure thing like standard of living.

IOW, anything to avoid the actual issue: P R I V I L E G E.

We are faced with a problem when trying to measure these issues on a societal level. We can only look at things that we can quantify. I can quantify a persons income and a persons purchases and other simple measures. I cannot measure their quality of life directly. Using multiple tools we can start to get towards figuring out what the real living standard inequalities are of people in our economy.

Why not measure how much wealth the privileged are enabled to take from the productive in return for no contribution?

Simply posting some attack job on one of those tools because you didn't like it isn't helpful. It's just ideological bias against measuring consumption for whatever reason you have to rage against the idea.

Measuring consumption is fine; the problem is in interpreting consumption inequality as a proxy for economic inequality.

Obviously when measuring consumption in a vacuum without other considerations it can lead to erroneous conclusions, but so can considering income disparities without taking in other considerations like cost of living in various areas.

And once more, the refusal to consider the possibility that inequality might be better measured by reference to wealth or PRIVILEGE.

quetzalcoatl wrote:At first glance, these may appear to be random or unrelated phenomena. They are not. They, in fact, are part of a cohesive whole.

Correct. But that whole is not what you think.

We have worked ourselves, partly by design and partly by historical circumstances,

It's by design in the sense that it is the result of deliberate action, but not as its direct intention.

into a demand-constrained trap - a trap that is devilishly difficult to escape from.

It's actually easy to escape from in principle, difficult in practice because we are in thrall to the economic nonscience of neoclassical economics.

The OP's question of consumption becomes the limiting factor for the economy as a whole.

No, you have to look deeper.

It goes something like this: As wages decline, workers have less money for consumption.

Why do wages -- especially disposable wages -- decline? Blank out.

Given fewer numbers of buyers with less disposable income, there is less demand for goods and services. Those that do have money set aside a large portion of their wealth, so that less of it enters the economy. Thus the size of the overall economies slows its growth or shrinks.

How do they "set it aside"? Blank out.

There are two ways out of this trap. The first is a deflationary spiral leading to depression. This could occur through a simple CB mismanagement of the post crash environment. It could also occur as successive bubbles lead to hyper-financialization of the economy (Minsky). In this scenario, ponzi objects begin to overwhelm the real economy, leading to more financial instability - another positive feedback loop. The tendency is acceleration of the bubble/crash cycle leading to a non-recoverable crash (depression).

That's a way "out"??

There is another option.

But it's not this:

Government can create money ex nihilo by purchasing goods in the private sector or spending 'helicopter money' via expansion of direct payments. Some combination of basic income and job guarantee would get spendable money to those who spend it the fastest (that is, the demand-constrained workers). The only limit to this process is inflation, which wouldn't occur until companies are 1) competing for labor, and 2) excess capacity is wrung out.

No. The money would simply be taken by the privileged, especially landowners. Anyone who wants to consume has to pay a landowner full market value just for the opportunity to consume.

After 30 years of neoliberal austerity, this can't be achieved overnight. The biggest problem with this option is cognitive: getting people to understand that deficits are not a bogeyman and government spending is necessary.

No, the cognitive problem is getting people to understand that the privileged, especially landowners, are nothing but thieves, and they will simply take everything we enable them to take.